Nigerian CEO sells nutritious foods to low-income consumers

Pelumi Aribisala, CEO and co-founder of Cato Foods

The fortified food business in Nigeria is on a rapid growth trajectory as people recognize the benefits of healthy eating. The trick is to make it affordable, according to Pelumi Aribisala, CEO and co-founder of Cato Foods, an indigenous pioneer of a range of micronutrient-infused traditional staple foods (biofortified foods).

“Many Nigerians still consider nutritious food to be a luxury, so we set out to find a cost-effective solution for families to have access to healthy, safe and affordable food, particularly those at the bottom of the pyramid,” says Aribisala.

With a background in food microbiology from Obafemi Awolowo University, Aribisala wanted to find a way to bring together farming and health. The business started in 2008 as a farm providing agricultural training for youth, with value-added food production. He launched Cato Foods in 2014 with his business partner Atinuke Lebile, the current COO, who has a background in agriculture from the University of Ilorin. “We decided to use our skills to give people access to affordable yet nutritious food. About 33% of children in Nigeria under the age of five are vitamin A deficient and one in five die every day from malnutrition-related diseases.

The fledgling company received support and training from a variety of organizations and institutions, including Nigeria’s Fate Foundation, HarvestPlus, and the Scaling Up Nutrition Business Network, among others.

Currently, more than 75% of its raw materials come from biofortified crops. While many nutrition-enhanced foods have this added to the raw materials, Cato Foods produces crops that have already been biofortified with vitamin A.

The main products are based on foods that are among the main staples in Nigeria: cassava, maize and orange sweet potato. “We didn’t want to change people’s food culture as this is very difficult in Nigeria. Instead, we add value to the existing food culture.”

Demand exceeds capacity

Six products have already been commercialized and another four are in development. The company’s biofortified cassava is used in popular local dishes such as garri and fufu. One of his best-selling products is powdered cassava custard with provitamin A, the first of its kind in Africa, he says.

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Cato Foods’ high-quality cassava flour is in demand from the confectionery and bakery industry. It also makes food for children, such as sandwiches made from cassava flour mixed with cowpeas and bananas.

Cato Foods Casstard Powder, a powdered custard made from cassava with provitamin A, is one of the company’s best-selling products.

The market is growing rapidly, Aribisala reveals, and the company is struggling to meet demand. Cato Foods relies primarily on a network of small farmers to produce biofortified crops, but has yet to reach critical mass. It had around 100 contributing farmers in 2020, but to meet growing demand, it aims to add 1,200 new farmers to the network this year, with a target of 3,000 farmers by 2024.

The company spends a lot of time and money on training. As cassava is a popular staple food in Nigeria, farmers already know how to grow it. However, training is required to improve planning and land preparation skills. Farmers must also learn to work in climate-smart and environmentally friendly ways; how to increase their yields from the current eight tons per hectare to 30 tons; And you need to make sure they work optimally with specially formulated planting materials for vitamin A-enriched crops developed through special breeding processes.

The goal is to put them in cooperative groups of 30 within a 50 km radius of the company’s facilities to reduce Logistics costs Cato Foods operates two factories with the capacity to use 35 tons of cassava per day, a figure it wants to increase to 100 tons per day by 2024.

Retail and distribution

The products – which are sold in community markets – are distributed through a network of companies that already deal with this Retail sale channel. Cato Foods also collaborates with other small businesses that sell complementary products, taking advantage of their networks. Most of its market is contained in southwestern Nigeria, covering six of the 36 states, including Lagos, from its factory in Osun state. It also has a distribution point in Ibadan, a city about a 30-minute drive from the factory.

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Currently, the company is not considering supermarket retailing until it builds up its capital and inventory resources. It still can’t meet that demand, nor will it be easy to manage the 30-day payment terms that supermarkets often impose.

challenges

Scaling the business is not easy. Nigeria is already a difficult place to do business, particularly for SMEs in the food sector.

The cost of logistics is high and represents about 50% of total expenses, explains Aribisala. This includes moving raw materials from farms to processing facilities and then to customers.

“Logistics is crucial to our business. We do not have our own vehicles and public carriers charge exorbitant fees. We are looking for investments to establish a distribution unit within the business.”

Packaging is another major expense. Although obtained relatively cheaply in China, the product is bulky and suppliers often set minimum quantities on sales, driving up prices. “We will not compromise the quality of the packaging and consumers are guaranteed food safety with our products,” insists Aribisala.

While the cost of Energy still a struggle in Nigeria, says network access has improved. The issue is the cost of diesel for backup generators when the grid fails. Infrastructure is another issue. “Bad roads make it difficult for farmers to access and take a lot of time.”

Cato Foods produces biofortified cassava products.

Looking to the future and climbing

Aribisala adds: “We need to scale and fast. For this, we need new investments, but also the right investments.” He believes the company is ideally positioned to attract impact investors, as his model goes beyond profit and seeks to make an impact by tackling one of Nigeria’s most serious and costly health issues, malnutrition. .

The company currently employs 25 full-time and 30 part-time people.

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While Cato Foods has benefited from a pioneering advantage among local producers, it now faces competition from multinational companies. Smaller packaging to make products more affordable was a competitive advantage for local players in this space, but multinationals have seen this model work and have adopted it too.

“This is a big threat to SMEs,” says Aribisala. “We are building brand loyalty in areas where we have regular customers, but to grow the market, we need investments to be able to increase volumes. We keep our margins low to keep prices low, but food is a volume game in Nigeria.”

The government could play a role in driving adoption and is encouraging the fortification of foods such as flour, vegetable oil and salt. He too has a campaign to promote ‘made in Nigeria’ products, but Aribisala says he hasn’t had enough traction to help local food producers.

However, the market is growing organically as Nigerians see the links between health, productivity and diet. “Our problem is not the acceptance of the products, but that we cannot currently meet the demand, therefore, we need to scale quickly.”

What are the lessons learned from this trip? Aribisala says that he has highlighted the need to be well capitalized from the start and ensure a constant supply of raw materials. Backward integration is key to sustainability.

“You definitely need reliable support for critical production inputs. Proper branding is also imperative; Your product must be attractive to consumers. People buy with their eyes first and then assess the quality once they try it.

“If I had to do it over again, I would make sure I had a farm big enough to group the farmers around the factory, as it would reduce costs and improve productivity. If you have a solid foundation and can add quality to people’s lives, the market will be there. Everyone needs to eat every day and nutritious food needs to be readily available, easily accessible, highly affordable and safe.”


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